Transcripts For CNBC Squawk Alley 20170518 : vimarsana.com

CNBC Squawk Alley May 18, 2017

Who should be paying higher personal rates sets up an llc or a pass through to get around the system. But, again, this is the backbone off your economy, is it not . It is. And we are working hard on how we create growth in that part of the economy. I dont know to put you on a calendar right now, but as you flesh this out and you get into the weeds on this, i hope you will be briefing us. I know the finance committee has jurisdiction of this, but we have more than a passing interest in all of it . Absolutely. We will be more than happy to come back and brief you and your staff on this. Thank you very much. Thank you senator shelby. Senator hide camp. Thank you mr. Chairman. Welcome mr. Secretary, your first appearance in front of this committee. I couldnt agree with you more. One of the demands of the American Public and the responsibility of washington, d. C. Is to encourage Economic Growth. That can solve a lot of our problems as we go forward. So i want to talk a little bit about the xm bank. Not a big surprise to a lot of people on this committee that i will be raising it. In 2014, xms last fully functioning year, the bank supported 164,000 jobs across the country. Thats compared to about 52,000 jobs in 2016. Thats because we didnt have a quorum. In 2015 alone three chinese expert credit agencies financed a total of 500 billion. The potential there is that those could have been markets that were accessing but were not getting access to today. Do you believe that the xm bank is a critical tool for enabling American Manufacturing competitiveness . I do. I have actually spent a lot of time looking at this. And i am concerned that without more members on it they can only make loans up to 10 million. I think that the board should obviously look at credit risk and everything else, but the xm bank is an important tool and the president has proposed adding new members. One of the great fears that we have is that suggestion of the leadership of the xm bank going to former representative scott garrett, who really is not just a critic of the bank and a reformer. I think he is someone that we are very concerned would not advance the interest of the bank and does not believe in the mission of the bank, not just reforming the bank. Do i have your commitment to work on a bipartisan basis to forward leadership in the bank that would in fact make sure that the bank is fully functioning and that these credits are actually come before the board for up or down approval . Im sorry, i just want to make sure i understood your question. Is it on my question is, if in fact scott garretts name is advanced to lead the bank as chairman, we are deeply concerned that many of these credits that are, you know, 30 billion worth of manufacturing today will not even see the light of day because the head of the bank has the ability to set the agenda for the board. So its very important that, you know, i dont quite honestly dont care if mr. Garrett is on the board but i do care if he is setting the agenda for the xm bank. So my commitment to you or my question to you is are you willing to work on a bipartisan basis so we can move these nominees as expeditiously as possible without getting into the weeds on someone that many of us suspect might be a sabture of the bank. I cant comment on his specific situation. He was proposed by the president. I would say i can assure you that the president is interested in making sure that the xm bank can lend. We have had lots of Business People come in and talk about this. It is something that director cohn and i are deeply involved in. I would tell you that i raised this issue as early as december with the president. And was grateful to hear that he was supporting the bank. But as we move forward, we are already in may looking to june. We dont have nominees yet. And the nominees that have been proposed i think cause great hesitation on our part. And so well leave it there. I wrote you a letter may 11th. Should have received it by now we will continue to monitor the testimony, first testimony in congress fortressry secretary Steven Mnuchin taking questions on a range of topics, from the xm bank to tax reform, financial regulation. Elon moi has been standing by. Didnt break a ton of new ground, what did you hear that moved the kneeling . Its important to realize he is testifying before the Senate Banking committee. A lot of the discussion was financial regulatory reform, there was a lot of discussion about fsoc and which institution should be designated as sfis and how you dedesignate a institution as being important to the system. He also talked about the need of transparentsy in fsoc. There were a few questions on tax. Internet sales tax and whether Small Businesses should collect that. Steven mnuchin did say he shared the senators concerns about that tax. And you also just heard an exchange with one senator over the passthrough rate and whether or not Small Businesses should be taxed at the same rate as large corporations. Now the white houses plan does include a 15 tax rate for businesses of all types. And secretary mnuchin reiterated that they do plan to try to find a way to ensure that rich people dont take advantage of that as a potential loophole but he gave new further details how they plan the do that. Thank you for summarizing some of what we heard from the treasury second. We will continue to watch that, bring you the headlines. Back here on squawk alley with jon fortt and johnson tolly. Watching the market having a come back. Some of that is the tech, that got battered yesterday. Apple up by 50 points along with goldman sachs. Ciscos guidance was disappointing. Cant help but draw a line on what internet spending was. Cisco adding a wrinkles. One was federal spending. And the government line. Another spending in mexico, specifically pointing to Economic Investment uncertainty in mexico as hitting them. Now you have got to look at President Trumps policies there and the stories that we have heard about investment kind of freezing as we wait on clarity on nafta. We are starting to see little movements on that. In the meantime, perhaps some businesses, tech businesses feeling the heat. Another reminder about how the Public Sector is such a big business for cisco specifically. I do see the semiconductors hard hit yesterday up about a pars and a half today. A lot of big down moves bounc g bouncing. On the s p weve redwayned a fifth of the yesterdays losses right now. Tentative at the start but it has built. L brands is surging 4 on the back of what was a better than feared quarter, which has become a common thread. Walmart coming in better than expected. I think it was an 11th straight quarterly gain for same store sales, 1 or higher. Ten year high. Childrens place. Up 3 . Seems like in every Specialty Retail category you have one winner. Thats childrens place. Lets get back to capitol hill. Test resect mnuchin taking questions from the Senate Banking committee. This is another area that im more familiar with than when i first came during my hearings. We have had several internal meetings where i have been briefed on this. We have actually heard weve reached out to industry. And we are aware of there is people who support it and people who dont support it. The agreement specifically, this is something we do in conjunction with the u. S. Trade representative. Now that the trade representative has been confirmed we will be close to making a decision but we would be more than happy to reach out to you and hear your views before we make that final decision. Thank you. I just think some of the questions which they have asked really do deserve to be able we should be able to get an answer to them one way or another before we actually i can assure you we will. This is something i am familiar with. All right. Thank you mr. Secretary. Also just in following up a little bit on senator shelbys discussion in terms of the tax rates and so forth and the fact that a lot of our job creators are not c corps, they are s corp. S. We have a lot of discussion about tax reform. Within a 74,000 page tax bill, some of those phages giveth and some taketh away. Every time we talk about simple fix we can talk about people that get hurt and people that receive an advantage. When we Start Talking about doing, there are going to be individuals who will lobby hard about not allowing some of the reductions to be removed even if there is a lower tax rate once they have done the calculation in their own situation. While we want to see a simple fix, and i think a lot of people out there would love to see that happen, there is also a concern that as the president would suggest it is truly time to prime the pump similar to the way it occurred during the Kennedy Administration and during what was a successful Reagan Administration where we refueled the economy. Part of it has to be regulatory reform. The second part is allowing more dollars to remain with individuals so they can reinvest back into businesses as well. When we get right down to it, are we stuck with only a program which is revenue neutral, meaning that we basically are going to take away as much as we give back . Or could we actually consider some sort of a down payment, perhaps, on a tax plan in which we allow for a reduction in actual taxes collected so that that can be reinvested back into the economy is, in a small nature, perhaps as in a bill im suggesting and i will be introducing in which we take our take our basic tax rate from those individuals at 10 down to 8, from 15 to 13, from 25 to 23, from 302028, from 35 to 33, from 39 to to 37. It is not a huge expend. Yet it may impact those at the bottom a little bit more than those at the top. And it will be a down payment to americans clearly giving them resources they can invest back into businesses and the economy. The president and i fubdly belief that tax reform is critical to growing the economy and getting back to sustained Economic Growth. We look forward to working with you. I think different people will have different views as to under what scenarios it should be revenue neutral. As weve heard today some people belief in dynamic. Some people believe in static. The president does believe that we need to create Economic Growth and that we are willing to have lower tax revenues in the shortterm if that will create Economic Growth. I think as i have said, the difference between 2 and 3 gdp is roughly 2 trillion over a tenyear period. It is a lot of money and Economic Growth will help us deal with a lot of other complicated Economic Issues we have. Thank you mr. Secretary. Thank you mr. Chairman. Thank you senator. Senator van holland. Thank you mr. Chairman. Thank you secretary for your service. Recently i sent you a letter together with many of my colleagues on this committee objecting to your decision to put keith norega in charge at the occ by using a maneuver that evaded Senate Confirmation. As you well know the occ serves as the chief banking regulator, overseeing over 2,000 banks. And mr. Norega has spent most of his career working very closely to protect the interests of those banks. I appreciate the letter i got back yesterday. It raised some additional questions. And im going to be sending you another letter to ask you to respond to the following questions. Why were you willing to install him as head of the occ before his ethics prevetting has actually been certified . So that the American Public can know whether or not conflicts exist now that he is in charge, at least for now, of regulating 2,000 banks. And second, your letter indicates that his special temporary 130 day status allows him to avoid President Trumps ethics pledge. I want to know whether that would allow him to immediately go leave the occ and lobby and work on behalf of big banks . Im also interested in whether all this means all this be presenting a nomity me in the next 230 130 days. Im going to send you a letter to ask for your fom up on that. I want to ask you a question about tax policy. And i agree with my colleagues who have said that if we are going to do tax reform, and i think tax reform can work, can be an important step, that we should focus on middle incomes relief and not another round of tax breaks for the very wealthy and special interests n. Fact, mr. Secretary, last november you agreed with that statement. And i quote what you said in november, any reduction we have in upper income tax will be offset by less deductions so there will be no absolute tax cut for the upper class. Thats what you said. Now, senators reed and tester have asked you questions about the tax reform plan that you are thinking of submitting or will be submitting. I have a question related to a tax cut plan thats already in progress that you and President Trump have strongly endorsed. And thats the House Health Care plan which according to the Congressional Budget Office has 900 billion in tax cuts, including 270 billion in tax cuts that go to higher income families. And the analysis of that tax cut is that millionaires will get on average 50,000 a year in tax cuts. And thats because what we did in the Affordable Care act is we applied Capital Gains in net income taxes, medicare taxes on very high income individuals on their Investment Income so they could help shoulder their share of the Medicare Trust fund. That totally violates, totally violates the standard you set forward in november, doesnt it . Allow me just first it is a really yes or no question, secretary. No, i want the first question you asked i wanted to respond to, which was on the controller of the currency at the occ. Yes, it is our intention. We actually have someone who the president has approved thats going through the fbi vetting process. I think as you know unfortunately with all the candidates this is a time consuming process. But we do hope that there will be somebody who is cleared and somebody who will go through a Senate Confirmation process. So this was in no way an attempt to put someone in who wouldnt be going through. This is someone who is in on an acting basis. On your second comment, i have been only partially involved in the health care. Thats not really in my priority area of responsibility. My comments are really more focused on tax reform. And yes, the president s intent is that there is middle income tax cut. And that is our major folk news mr. Secretary, my question was, it is a fact that the Health Care Bill, socalled Health Care Bill that passed the house has 900 billion in tax cuts. Combined with almost 900 billion in cuts to medicare. A huge pillar of this bill is tax cuts. Isnt it that the tax cuts flatly contradicts your test that any reduction we have in income taxes will be offset by less deductions . So there will be no absolute tax cut for the upper class . Isnt it a tax cut for millionaires. Yes or no. Again, my comments were based on contacts reform. This bill is a tax policy. Mr. Chairman, whats been interesting about this Health Care Debate is you have a major tax change mask raiding under the cover ever health care. Why is there a big tax cut in the Health Care Bill . You are the secretary of the treasury. You deal with tax policy . Again, i think the idea was that that tax was hurting investment and jobs in this country and that, again, it was part of the health care repeal. So, yes, factually, that tax will help people who are investing money back into the economy and will create jobs. All right mr. Chairman, it flatly contradicts your statement of no absolute tax cuts for the upper class. It is a flat contradiction. Senator thank you, chair. Mr. Secretary, thank you for being here. Thank you. I appreciate you being willing to step up and do this. Its nice to have a private sector guy in here trying to figure this out. I want to go in the debt and the portfolio. We have got about 20 trillion of debt all in. Thats about a third of all sovereign debt in the world. 200 total debt. 200 trillion of total debt in the world. One out of every three Government Debt dollars that are out there are ours. We have got also the largest fed Balance Sheet in history. The question is, during this period of low Interest Rates, about a little over 50 , i think, are three years or less in maturity. While the uk has about 48 of their bond portfolio is 20 years or longer. So my question is, is this something that you guys are taking a look at . Do you plan to go a little longer while Interest Rates are still in somewhat of a low environment . It is. Its something i have talked about. We are studying ultralong bonds, which would be 50year bonds or even longer. We have been working with the treasury borrowing committee, which is outsiders to advise us on what the market for that is. Its something that well consider as we look at debt management. No decision has been made. And we are seeking guidance as to the demand. All right. Thank you. Lets move to basil three. Can we talk about that . We can. Its part of your job, as i understand it. Looks to me we are unilaterally way ahead of our other signatory partners in bass ill three. Looks to me for small banks, Community Banks, regional banks they are hampered by the cost of compliance and also by the reserve requirement. Is there any attempt in your future priorities to look at what we are doing regarding our future commitments to basil three and what we can do no get the other partners in basil three to line up and at least catch up with us in terms of the commitment of safety for banks . Ther

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